Tianqi Lithium Industry: the planned production capacity of lithium chemical products in the medium term exceeds 110000 tons / year.

According to the investor relations activity held by Tianqi Lithium Industry (002466) on May 21, Tianqi Lithium Industry currently has a total production capacity of about 44800 tons / year of lithium chemical products, and the planned production capacity of lithium chemical products in the medium term exceeds 110000 tons / year. Terlison Lithium concentrate has a completed production capacity of 1.34 million tons / year and a planned production capacity of 1.94 million tons / year.

Tianqi Lithium Industry said that in the past two years, the expansion of Tianqi Lithium processing business has slowed down because of debt, capital and other problems, and the management is now fully committed to "reducing debt, deleveraging" and debugging the Quinana Lithium hydroxide project.

With regard to the construction of the Quinana Lithium hydroxide project, at present, TLK is combining the results of early stage debugging work, and stronger resources are deployed by Tianqi Lithium Industry headquarters to form a joint working group with the TLK team to step up communication and docking, focusing on achieving comprehensive debugging conditions and carrying out relevant work in a normal and orderly manner as the primary goal as soon as possible. Strive for the first phase of the "annual production of 24000 tons of battery-grade lithium hydroxide monohydrate project" to be officially put into production in 2021 and reach production in the fourth quarter of 2022. The main project of the second phase of lithium hydroxide project has been basically completed and the construction is still in a state of suspension.

In addition, TLK has signed a long-term supply agreement with customers on the product sales of the first phase of the lithium hydroxide project. before the project is put into production, the company and the TLK sales team will negotiate amicably with the long-term lithium hydroxide project leader, or adjust the new delivery date of the long-term supply agreement, or adjust the product supply schedule, or actively discuss with customers other options to resolve potential risks while ensuring that customer needs are met as far as possible. To reduce the risk of such litigation or arbitration and its related negative impact. At present, the company's flood base currently has a capacity of 5000 tons / year of lithium hydroxide, and the process for producing lithium hydroxide is similar to that of the first phase of the company's lithium hydroxide plant in Quinana, Australia, which can meet the basic supply of some of TLK's long-term customers. At present, the company has provided some of its customers with lithium products produced by domestic factories.

Tianqi Lithium Industry said that since the fourth quarter of 2020, the overall performance of the lithium industry has improved, and product prices have risen. At present, the production base of the company is in normal and orderly production operation, and the production is in a state of saturation.

According to reports, at present, the raw materials of each lithium compound processing base in Tianqi Lithium Industry all come from Tellyson's Greenbush Mine. At present, the production capacity of Terlison Lithium concentrate is about 1.34 million tons / year. Terlison is currently planning production according to the needs of Tianqi and Yabao shareholders. Terlison's first phase capacity can basically meet the demand for lithium compound capacity that Tianqi and Yabao have already put into production; the second phase of capacity release depends on the subsequent launch of the two shareholders' new lithium salt capacity, including the commissioning of Tianqi Quinana Phase I lithium hydroxide plant. The Terlison Phase III Lithium concentrate expansion project has been launched, with an estimated additional lithium concentrate capacity of 600000 tons per year. On December 22, 2020, the Winfield Board of Directors decided to postpone the trial operation of the Terrison Phase III lithium concentrate expansion plan to 2025.

In addition, Tianqi Lithium Industry successfully acquired the SQM23.77%An equity held by Nutrien Group, realizing the strategic layout of the world's highest quality salt lake lithium resources. On May 20th, SQM said in its conference call for the first quarter of 2021 that its production expansion and capital expenditure plans have not changed or will be carried out ahead of schedule. It plans to produce 120000 tons / year of lithium carbonate and 21500 tons / year of lithium hydroxide by the end of 2021, and 180000 tons / year of lithium carbonate and 30, 000 tons of lithium hydroxide by the end of 2022.

The original text of the exchange is as follows:

Q: what has Mr. Xia Juncheng, the president of the company, done since he took office? What kind of work goals do you have?

A: as president of the company, Mr. Xia Juncheng is mainly responsible for the overall and daily management of the company. the work carried out since taking office mainly includes: (1) going to the production base of the company to familiarize himself with the company's business, production process and factory management process; (2) concentrate time on going to the Australian base to be familiar with the construction and commissioning progress of the Australian lithium hydroxide project, sort out the difficulties in debugging the project and put forward targeted measures to restart the commissioning. To assist local subsidiaries to establish a good image of the company; (3) to jointly demonstrate and promote the company's further financing means in order to achieve the purpose of "de-indebtedness and leverage reduction"; (4) the management team of the joint company will optimize the company's integrated management system, design and formulate the company's development direction and plan for the next five years, and form a new "global partnership strategy" to help the company's global market development.

Q: when will the company consider new capital expenditure?

A: the current goal of the management is to make every effort to ensure the normal and stable operation of resources and processing bases at home and abroad, and at the same time step up the demonstration and implementation of various equity financing instruments that help to reduce the company's debt leverage. in order to fundamentally optimize the company's asset-liability structure, at the same time comply with the good opportunities for the development of the industry, improve the company's overall performance, and return shareholders' expectations.

Q: could you tell me something about the claimed options and hedging business carried out by the company? Will the follow-up be carried out?

A: Tianqi Lithium Hong Kong, a subsidiary of the company, signed a Variable Prepaid Share Forward Transaction contract with Morgan Stanley International Co., Ltd. on February 11, 2019 and July 1, 2019, respectively. Under the contract, Tianqi Lithium Hong Kong charged part of its SQM B shares to Morgan Stanley, to obtain a three-year loan and bought put options equal to the amount of the shares charged as a guarantee of the loan's repayment ability, while selling call options equal to the amount of the shares charged to hedge part of the financing cost. After the claim option expires, Tianqi Lithium Hong Kong can choose to deliver the repayment in cash or stock with the same amount of repayment. At present, the loan is not yet due. The project belongs to unrealized profit and loss, and under the influence of uncertain factors such as stock price and exchange rate, the company calculates the claimed options strictly in accordance with the requirements of "Accounting Standard for Enterprises No. 22-recognition and Measurement of Financial Instruments" and carries on the follow-up measurement according to the fair value. The difference between fair value and book value will result in profit or loss of fair value change. At the same time, the company will take appropriate strategies to reduce the impact on the income statement.

Q: how much financial assistance has the company's controlling shareholders provided to listed companies? Will the previously disclosed reduction plan continue?

A: as a prerequisite for IGO transactions, Tianqi Group, the controlling shareholder, has clearly pledged to provide liquidity support to listed companies. Tianqi Group will provide financial assistance to Tianqi Lithium Industry by reducing part of its shares or other self-raised funds on the premise of complying with laws and regulations and regulatory documents. Up to now, the total amount of financial assistance provided by the company's controlling shareholders to listed companies in 2020 and 2021 is about 1.14 billion yuan.

Q: at present, the price of lithium concentrate in the market is rising rapidly. when is the company going to mine Yajiang Zola spodumene mine?

A: at present, the raw materials of each lithium compound processing base of the company come from Terlison's Greenbush mine. Greenbush spodumene is the solid spodumene mine with the highest grade, the largest reserves and the lowest cost in the world. Its lithium concentrate production capacity can provide a strong resource guarantee for the company. The company has always regarded Ganzi Yajiang Zola spodumene mine as a medium-and long-term and necessary resource reserve, which is still in a state of slow construction due to various factors, follow-up specific progress, please pay attention to the company announcement.

Q: what is the current capacity and follow-up capacity planning of Terlison Lithium concentrate? How is it assigned to Tianqi and Yabao?

A: the second phase of the Tellyson chemical grade lithium concentrate expansion project was completed and put into production in the third quarter of 2019, with an additional lithium concentrate capacity of 600000 tons per year. At present, the production capacity of Terlison lithium concentrate is about 1.34 million tons / year. Terlison currently plans production according to the needs of Tianqi and Yabu shareholders, who can each get about 50% of their annual production according to their actual needs. Terlison's first phase capacity can basically meet the demand for lithium compound production capacity currently put into production by Tianqi and Yabao; the release of phase II capacity depends on the subsequent investment of the two shareholders' new lithium salt production capacity, including the commissioning of Tianqi Quinana Phase I Lithium hydroxide Plant. The Terlison Phase III Lithium concentrate expansion project has been launched, with an estimated additional lithium concentrate capacity of 600000 tons per year. On December 22, 2020, the Winfield Board of Directors decided to postpone the trial operation of the Terrison Phase III lithium concentrate expansion plan to 2025.

Q: is there any change in the commissioning time of the first phase of Quinana Lithium hydroxide plant?

A: at present, TLK is combining the results of previous stage commissioning work, with stronger resources deployed by Tianqi Lithium Industry headquarters and TLK team to form a joint working group to step up communication and docking, focusing on achieving comprehensive debugging conditions as soon as possible and carrying out related work in a normal and orderly manner as the primary goal, and strive for the first phase of the "annual production of 24000 tons of battery-grade lithium hydroxide single water project" to be officially put into production within 2021. It will reach production in the fourth quarter of 2022.

Q: TLK is still being debugged. Are the previously contracted customers stable?

A: TLK has signed a long-term supply agreement with customers on the product sales of the first phase of the lithium hydroxide project. the long-term supply agreement has the prerequisites and the corresponding mechanism of friendly negotiation and negotiation between the two parties, allowing both parties to agree on a new delivery date and adjust the supply schedule of the products. Before the project is put into production, the company and the TLK sales team will negotiate amicably with the Lithium hydroxide project long-term single customer, or adjust the new delivery date of the long-term supply agreement, or adjust the product supply schedule, or actively discuss with customers other options to resolve potential risks while ensuring that customer demand is met as far as possible, so as to reduce the risk of such litigation or arbitration and its related negative impact. At present, the company's flood base currently has a capacity of 5000 tons / year of lithium hydroxide, and the process for producing lithium hydroxide is similar to that of the first phase of the company's lithium hydroxide plant in Quinana, Australia, which can meet the basic supply of some of TLK's long-term customers. At present, the company has provided some of its customers with lithium products produced by domestic factories.

Q: the first and second phase of the Quinana project has a common part. how much will it cost for the second phase of the project to be completed and put into production?

A: in view of the fact that the second phase of the lithium hydroxide project is close to the first phase of the lithium hydroxide project, the common projects of the two phases mainly include office administrative logistics system, water system, power system, compressed air system, boiler system, infrastructure and so on. The main project of the second phase of lithium hydroxide project has been basically completed and the construction is still in a state of suspension. If the relevant information touches the company's disclosure obligations in the future, the company will announce it in time in strict accordance with the provisions and requirements of relevant laws and regulations. Please pay attention to the company's follow-up announcement.

Q: the construction cost of Quinana is relatively high, will this lead to the high production cost of the product after it is put into production?

A: the comprehensive investment cost of the Quinana Lithium hydroxide project in Australia is comparable to that of similar chemical plants invested by peers overseas. The project is the company's first world-class lithium hydroxide automation plant designed and built independently overseas, following the principles of localization, high-standard construction and operation management, with a high degree of intelligence and automation. The project is established in a professional chemical park, which can provide natural gas, electric power, sulfuric acid, liquid alkali and other production auxiliary materials nearby, which is matched with the Tellyson lithium mine, which is 250 kilometers away. it has the comparative advantages of convenient supply, low transportation cost and strong supporting capacity. After it is completed and put into production, it will be a highly intelligent, continuous and stable fully automated battery-grade lithium hydroxide production line. The quality of the production line, environmental protection and labor protection of the project all meet the high standards required by overseas customers. It provides a reliable guarantee for the production of high-quality battery-grade lithium hydroxide products, which can effectively improve the quality control ability of downstream customers in the production process, and the standards implemented by the project production are higher than the current Chinese standards. The content of impurities is very low, which can make the products produced by downstream customers have better performance and better quality.

Q: how is the IGO deal going?

A: the company is actively promoting the transaction with IGO, which is accompanied by a series of delivery prerequisites that need to be met in order to officially launch and complete the delivery. So far, progress has been smooth and some of the prerequisites have been met. Except for the examination and approval of the internal restructuring of the transaction by the FIRB and the tax authorities of the United Kingdom and Australia, the other delivery conditions have been completed. The relevant external examination and approval work is in normal progress, and so far there have been no substantive obstacles such as rejection or prohibition. If the relevant information touches the company's disclosure obligations in the future, the company will announce it in time in strict accordance with the provisions and requirements of relevant laws and regulations. Please pay attention to the company's follow-up announcement.

Q: does the company have any plans or tendencies for follow-up financing plans?

A: the company is stepping up efforts to promote the implementation of various equity financing instruments that help to reduce the company's debt leverage, including but not limited to the introduction of strategic investors at home and abroad, H-share issuance, targeted additional issuance, market-oriented debt-to-equity swap, etc., to solve the debt pressure as soon as possible, improve profitability and cash flow level, and return the company's asset-liability ratio and financial leverage to a reasonable level.

Q: does the company think that the recent political changes in Chile will adversely affect the operation of SQM?

A: the company has taken note of the relevant news reports, we continue to pay attention to the changes in Chilean policy and market environment, and timely and fully evaluate its impact on the production and operation of the company's shareholding company SQM.

Q: how much impact does the Chilean epidemic have on the expansion of SQM production?

A: on May 20, 2021, SQM said in its conference call on the first quarter of 2021 that its production expansion and capital expenditure plans have not changed or will be carried out ahead of schedule. It plans to produce 120000 tons / year of lithium carbonate and 21500 tons / year of lithium hydroxide by the end of 2021; and 180000 tons / year of lithium carbonate and 30, 000 tons of lithium hydroxide by the end of 2022.

Q: at this point, how does the company evaluate the acquisition of SQM?

A: SQM is mainly engaged in the production and sales of lithium and its derivatives, specialty plant fertilizers, potash fertilizers and industrial chemicals. It is the world's leading manufacturer of lithium chemical products and the largest producer of iodine and KNO3. The Atacama Salt Lake in Chile, which is operated by it, is a lithium salt lake with high lithium concentration, large reserves and mature exploitation conditions all over the world. Since SQM was held by Potash (Nutrien (predecessor of SQM) in 2001, the ownership structure of SQM has been relatively stable for a long time, and the main shareholders have been PAMPA Group, Nutrien Group and Kowa Group, and the main shareholders are less willing to sell Class A shares. In September 2016, Potash and rival Agrium announced plans to merge Nutrien, a new company. For the purpose of the merger of Potash and Agrium, antitrust censors in India and China have required Potash to meet a series of conditions, including divesting its stake in SQM within 18 months from November 2, 2017, creating a rare trading opportunity for SQMA shares. After several rounds of bidding and negotiation, the company finally successfully purchased the SQM23.77%An equity held by Nutrien Group, and obtained the maximum value that can exercise the voting rights of Class A shares, thus realizing the strategic layout of the world's highest quality salt lake lithium resources, helping the company to improve the resource layout, further enhance its long-term competitive strength, and promote the upgrading and upgrading of China's new energy industry, which is of great strategic significance.

Q: how does the company view the current lithium price and upward trend?

A: since 2021, global lithium battery production has ushered in a positive trend. Some lithium-ion battery manufacturers have accelerated capacity expansion. With orders for downstream cathode materials picking up, lithium carbonate prices have gradually rebounded. We believe that the current pace and trend of lithium price rise is not simply hype, nor is it driven by policy support, but by the global demand for electric vehicles and 5G applications, and by real market behavior. it is the result of a certain degree of commercialization, technological innovation, applicability, charging convenience and the satisfaction of social needs of electric vehicles. Moving towards carbon neutrality and turning to the development of a green economy has become the consensus of the world's major economies. 2021 is the new first year of the new energy vehicle industry, and the energy storage industry will be a new blue ocean. With the rapid growth of global sales of new energy vehicles and the active replenishment of the industrial chain, the demand cycle of the lithium industry is strong and is expected to resume rapid growth. Therefore, we believe that this price increase will be a sustainable and steady rise, which will play a positive role in promoting the continuous operation of the company and the healthy development of the industry. In addition, because of its strategic significance, it will be more difficult to obtain and control lithium resources. therefore, lithium resources will become a key factor restricting the development of the industry in the medium and long term. In the long run, with the development of lithium power and energy storage battery industry, the importance of lithium resources will become more and more prominent, and the bargaining power and industrial chain status of lithium resources enterprises will continue to improve.